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Raising the Retirement Age in Aging Populations

Discuss whether the government of a country with an ageing population should raise the retirement age.

Category:

Public Finance and Government Intervention

Frequently asked question

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Answer

Use empirical evidence and statistical analysis to strengthen your arguments.



➡Title: Evaluating the Impact of Increasing the Retirement Age in an Ageing Population
🍃Introduction: The question of whether the government of a country with an ageing population should raise the retirement age is a complex issue with potential implications for the economy, workforce, and social welfare. This essay aims to discuss the advantages and disadvantages of increasing the retirement age in such a context.
I. Advantages of Raising the Retirement Age:
➡️1. Increase in the Labour Force: Increasing the retirement age extends the working lives of individuals, leading to a larger and more active labour force. This can help mitigate the effects of an ageing population by ensuring a sufficient number of workers to support the economy and maintain productivity levels.
➡️2. Decrease in the Dependency Ratio: Raising the retirement age reduces the dependency ratio, which is the proportion of non-working individuals (retirees) compared to the working-age population. A lower dependency ratio can alleviate the strain on public finances by reducing the costs associated with providing pensions and social welfare benefits.
➡️3. Higher Productivity and Experience: Older workers often possess valuable skills, experience, and institutional knowledge acquired throughout their careers. By keeping them in the workforce for longer, productivity levels may be sustained or even increased. Their experience can also contribute to mentoring younger employees, fostering knowledge transfer and skills development.
➡️4. Financial Sustainability: Increasing the retirement age can alleviate the financial burden on pension systems, making them more sustainable. With longer working lives, individuals have more time to save for retirement, reducing reliance on public pension schemes and promoting personal financial responsibility.
➡️5. Potential for Health and Well-being: Staying engaged in work can provide older individuals with a sense of purpose, social interaction, and mental stimulation, which can positively impact their overall health and well-being.
II. Disadvantages of Raising the Retirement Age:
➡️1. Inequity and Lower Living Standards: Increasing the retirement age may be seen as unfair to those who have contributed to the workforce for many years and have lower life expectancies. It could also result in lower living standards for individuals who are unable to continue working due to health issues or physically demanding occupations.
➡️2. Blocking Job Opportunities for Younger Workers: Older workers remaining in the workforce may limit job opportunities for younger individuals, potentially exacerbating youth unemployment and hindering career progression.
➡️3. Health and Physical Demands: Some occupations may be physically demanding, and older workers may experience challenges in maintaining their health and physical capabilities, leading to potential strains on their well-being.
➡️4. Alternative Measures: Instead of raising the retirement age, alternative measures can be considered, such as promoting private pension schemes to encourage individual savings for retirement or implementing policies to attract a younger working-age population through immigration.
👉Conclusion: The decision to raise the retirement age in a country with an ageing population requires careful consideration of the potential benefits and drawbacks. While increasing the retirement age can expand the labour force, reduce the dependency ratio, and enhance productivity, it may also present challenges related to equity, job opportunities for younger workers, health concerns, and the need for alternative policy measures. Policymakers should strike a balance between addressing the economic and social implications of an ageing population while safeguarding the well-being and rights of all individuals. Flexibility and tailored solutions, such as offering options for phased retirement or providing support for retraining and skills development, can help navigate the complexities of this issue and ensure a sustainable and inclusive future for all members of society.

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I. 🍃Introduction
- Brief explanation of the topic
- Importance of the retirement age

II. Advantages of increasing the retirement age
- Increase in the size of the labour force
- Decrease in the dependency ratio
- Increase in output/incomes
- Increase in tax revenue
- More experienced workers
- Higher productivity
- Decrease in the cost of pensions
- More affordable pensions for the government/firms
- Enable workers to save for their retirement
- Increase in physical and mental health of the elderly
- Avoidance of raising tax rates
- Opportunity cost of pension provision

III. Disadvantages of increasing the retirement age
- Inequitable if life expectancy is low
- Lower living standards
- Older people blocking jobs for younger people
- Older workers may be less productive than younger workers
- Physically demanding work may affect older workers' health

IV. Alternative measures
- Encouraging immigration of people of working age
- Promoting private pensions

V. 👉Conclusion
- Summary of the advantages and disadvantages of increasing the retirement age
- Final thoughts on the topic

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Increasing the retirement age will increase the size of the labour force - there will be a decrease in the dependency ratio - output / incomes will increase - this will increase tax revenue -. Older workers have more experience - productivity may be higher -. The cost of pensions will fall - pensions will become more affordable to the government/firms -. It will enable workers to save for their retirement - may increase the physical and mental health of the elderly -. It may avoid the need to raise tax rates -. Pension provision involves opportunity cost - the funds could be spent on e.g. infrastructure projects -. why it should not: If life expectancy is low - it may be seen to be inequitable - it may lower living standards -. Older people blocking jobs to younger people - older workers may be less productive than younger workers -. If work is physically demanding - older workers’ health may suffer -. There are alternative measures - encouraging immigration of people of working age - promote private pensions -.

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